FSC 2014-15 Federal Budget Submission
John Brogden
The Financial Services Council has called on the government to consider whether the income and asset tests for the Age Pension are too generous and whether the long term cost of the pension is sustainable.
It is 2014-15 Federal Budget submission, the FSC says it is concerned that the stability of the retirement system is being undermined by loose eligibility rules that allow Australians with substantial assets to receive pension payments.
John Brogden, CEO of the FSC said: “A couple with one million dollars in assets and an annual income of $60,000 are eligible to receive a part pension.”
“It’s time to assess whether this is an appropriate spend of government funds.”
The FSC has also recommended increasing the preservation age for accessing superannuation payments from 60 to 62 years to reduce the gap for Age Pension eligibility from seven to five years.
“This would have a significant positive budget outcome and also reduce the national private retirement savings gap by $400 billion,” Mr Brogden said.
Other recommendations in the FSC’s 2-14-15 pre budget submission focus on the contribution of superannuation and life insurance to improving the budget bottom line, red tape reduction and promoting the growth and export of financial services. Key recommendations include:
- Policy options − including tax incentives and/or disincentives − to increase the level of private disability insurance coverage to reduce the level of Commonwealth expenditure on the DSP;
- The McClure Review of welfare should consider ways in which private disability insurance could reduce the increasing flow of persons onto the DSP without compromising living standards of disabled persons;
- The government should communicate that the NDIS and NIIS do not replace the need for adequate personal disability insurance and highlight the differences between the financial support that will be provided by the NDIS/NIIS and financial benefits of having adequate life and disability insurance;
- Policy options should be considered to encourage the take-up of private disability insurance that would complement the NDIS and NIIS;
- A reduction in the Managed Investment Trust (MIT) withholding tax rate from 15 to 10 per cent should be delivered to bring Australia into line with other financial centres in our time zone;
- The government maintain its commitment to implementing the Asia Region Funds Passport across APEC economies;
- Release the Board of Taxation’s report on Collective Investment Vehicles as a priority;
- Maintain the commitment to an increase in the Superannuation Guarantee to 12 per cent by 1 July 2021;
- Retain the Low Income Superannuation Contribution but pause payments for two years in line with the delay in the Superannuation Guarantee increase; and
- Increase the superannuation preservation access point to 62 years of age;
- Provide that payments for up-front financial advice could be tax deductible; and
- Publish an Intergenerational Report in 2014.
Click here to view the FSC’s 2014-15 pre-Budget submission and new research by KPMG for the FSC − Disability Protection Gap in Australia 2014.